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tv   Eurozone Greece  CSPAN  June 25, 2012 1:10am-4:00am EDT

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by spending 15 years in detention. your presence here today is a testament to your courageous approach of steadfast non- violence and reason in the face of an oppressive, powerful and determined regime. your struggle has reverberated around the world. it has forcibly reminded us that free and fair elections, a free press, an independent judiciary, and the institutions of civil society are the cornerstones of democracy d individual freedom. we take these freedoms for granted at our peril. democracy is never won once and forever it is a process requiring constant vigilance. today you have reminded us of the struggle that must continue in burma and elsewhere. in post-war europe we have seen that it is possible for countries to make the transition from totalitarianism to democracy, and i trust that
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this will give you hope and encouragement for the journey ahead. your stand against repression has been at the heart of the national league for democracy's struggle. i am sure that at times during your long campaign you must have felt unbearably lonely, though as you yourself have said, the nobel peace prize allowed you to feel part of the international community. and indeed, through you, your people and your country were always in our minds. now, together, we must use this occasion of your address to fellow parliamentarians to renew our own determination to be part of the struggle for liberty whenever and wherever it arises. thank you.
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[applause] ♪
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>> here's a look at president obama's schedule. he travels to new hampshire and boston on monday for campaign events. tuesday, he will speak at atlanta and miami and returned to washington, d.c. in the evening. he meets with the crown prince of of a double wednesday to discuss regional issues and he .nd the president will continue to attend meetings at the white house thursday and friday. >> monday, talking points memo reporter will discuss the farm
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and transportation bills in congress. then an examination of the impact the bush era tax cuts. he will talk about a recent report on the impact of the tax cuts on states and congressional districts. tional journal on the role of the immigration and customs enforcement. washington journal live with your calls, tweets, and e-mails at 7:00 a.m. eastern here on c- span. >> an annual competitiveness report on monday. that will focus on the obama administration's efforts to improve u.s. export financing options. the bank was reauthorize at the end of may after receiving bipartisan support in congress. the ministration set a goal doubling of exports to $3
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trillion by the end of 2014. on friday, the atlantic council hosted a discussion on the current state of europe and solutions to its debt crisis the possibility of institutional reforms, the roles of france and germany, and the recent french and recollections and the bailout. this is an hour and a half. >> hello and welcome to the atlantic council. i run the tragic but dick relations program here. i want to extend a welcome to those were your and those watching on c-span. this panel was organized with our global business and economic
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program. for the last two years it seems europe has been synonymous with economic crisis. within the eurozone, one country after another seems to go through either a banking crisis or a sovereign debt crisis and sometimes both. numerous forecasts that the eurozone will break up have been made as well as some that even the european union will end. now there is the specter of a 1930's tight economic crisis. -- type economic crisis. we hosted josef ackerman, and he expressed confidence that europe will make it through this concert -- crisis. the same week we hosted christine lagarde who was
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arguing for much more urgent approach saying that time is running out to avoid this becoming a much broader crisis. the zero governments have responded to this crisis with a series of new fiscal policies and institutions. we have new rules on hedge funds and other forms of financial interactions that are believed to have caused some of this crisis. we have the so-called six pack of new measures designed to return discipline to european debt and deficit levels. we have the establishment of a european stability and financial facility. and the european stability mechanism to provide emergency funding rate we have enhanced banking subversion including a new agency in london. the fiscal compact which reinforces the six-pack is now
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in the process of being ratified. we have to in your responses under discussion of. even greater banking supervision to the point perhaps of a banking union and the mutual ization of debt. the crisis persists. as one moves away, the other comes to the fore. is grace the next day of spain or italy or perhaps even france. the market seems unconvinced that europe will succeed. on one level, this is surprising. the eurozone has strong economic fundamentals. the deficit as a percentage of gdp is 2.8% as opposed to her hours in the u.s. of 8.7%. the debt as a percentage of gdp is not far off. 87% vs. 70 or so.
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as callous observers have noticed, fiscal decision making in europe is still based at the national level. the healthy overall figures masked a very wide range from estonia where the debt of 6% and denmark, not in the eurozone but germany with a deficit of in to% to 3% yanda 60% debt to ireland, greece, italy, portugal, was dead as a percentage of gdp over 100 in 2011. as a result for two years now, the crisis has ebbed and flowed while dominating discussions within and about europe. it has dominated elections and government crisis -- crises. that brings us to today. even if you have been following this crisis from the beginning, the last six weeks to a month has been harrowing and
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uncertain. we have a new french president who is arguing for a different tack. one that is less austerity and more growth. we have a bailout of spanish banks with growing concerns expressed about italy. moody's downgraded 15 banks, the some of which are european plers. we have had to break elections so close together. the one this past week was a narrow victory. we now have a tentative coalition. they want to renegotiate their arrangements with the new but it has become clear that they have lost to will months in implementing reforms. we also face a series of eu
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meetings. ministers -- heard from book or the need to do more. chancellor merkel of germany wants is meeting with others. we are hoping key decisions will be made. to discuss what the future may bring, we have an excellent panel and i will introduce them in reverse order of go. ambassador gray is one of the top u.s. regulatory lawyers. with the u.s. represented as -- was a u.s. representative and was an atlantic council board member. our next panelist is a senior research fellow in berlin. chia's worked previously for other thing takes in germany and is one of the most prolific commentators on the politics of
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a european integration. dr. jacob kirkegaard has written on workforce issues and pension reform in europe and elsewhere and for the last two years focused on economic reform. let me start with jacob and let me ask, where we now? how close are we to the edge of the cliff? is the european economy? >> let me start by quoting president obama in talking about this and the your area if you get the diagnosis of the crisis right is doing just fine. what i mean by that is that there is no doubt the euro area faces a host of crisis. a banking crisis and we have a competitiveness crisis across
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the southern periphery and a fiscal crisis. the overall diagnosis of what the euro area is suffering from is an institutional crisis. it is a crisis of the design of the euro area itself which as it was created in the late 1990's is a flawed design. basically does not work when you have a major financial and economic crisis as we have right now. what that means is it is a political crisis that europe is facing. it is about the process in which national sovereignty and deep national sovereignty of the kind of national sovereignty over banking regulation and fiscal policy that governments were not willing to hand over to european institutions in the 1990's are now in the process of being transferred through the
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narrow area. this is not a cooperative game. as economists, we can sit down and say, this is -- should not be very hard. we can agree what is the optimal approach. the basic reality is because we're dealing with handing over of national sovereignty which is the commodity that no government even in the euro area will always -- par with voluntarily, you basically need the level of acute crisis that we're seeing right now for this process to happen. and this is important to our -- to understand the design of the euro area had led sovereignty over banking and fiscal issues which are really the key policy levers in a financial crisis at the national level. the crisis response is
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fundamentally dictated by one single element which is that of political moral hazard. it is moral hazard that dictates that when you are, unlike here in the u.s. when you pass the time, because congress is sovereign, the european council is not sovereign. it cannot dictate the policies of recipient governments for such bailouts, which is another way of saying that they bailouts will always be partial. there will always be conditional, and those of you who believe that europe needs -- will ever put together a fully credible and enough firewall or wrong. that will not happen. because it did happen it would
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have-adverse effects for the spanish and italian and parliaments to pass the reforms that are neede or we are in the crisis right now is we have already had essentially or this moral hazard dictated process. relying on political brinkmanship which means that we take a crisis and you go very close to the edge of having a disaster and a disaster that everyone agrees is a disaster, which is of course the collapse of the euro. you go up to the edge to basically course the other players into giving you concessions but basically, a game their radical exercise, if you like. the main players here are the core garment's led by germany, the european central bank, and the peripheral governments and occasionally the rest of the world through the imf. we saw this in may 2010 with the
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first greek bailout. we saw in august last year when the -- the ec be squared off against the spanish and italian government. we saw in december last year and we're in the process of seeing it again right now. it is essentially a game. it is a repeated game of chicken that is being played out. their response function is very clear. germany and the c.b. will ever pray publicly to say they stand fully behind the ural because if they did, they would be subject to moral hazard but did not make any mistakes. there is plenty of political willingness to do what is necessary and in the case of the european central bank, there is also plenty of financial firepower.
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in the ecb. this is the european central bank. what i mean by a fire wall, consider that to date, the european central bank has bought 3% of actual assets as a share of euro area gdp in the form of security market purchases and the to cover bond market programs they had. what that means is if the ecb i and an acute situation had to buy one trillion lira worth of spanish and italian debt, there would after that process only on 14% of euro area gdp in our right assets. that is less than what the federal reserve already owns. it is much less than what the bank of england owns as a result of quantitative easing. you should ask yourself is it credible the ecb would not want to do this and have the your
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area collapsed? i absolutely believe that is not the case but again, this is a non-cooperative game that relies on the repeated game of chicken to course governments to handing over national sovereignty. it is a lot more stable than what is perceived -- misperceived by financial markets. >> m. e. follow-up on this. you're arguing this is a bargaining game and one can see that. one also sees the market constantly raising the stakes. the market seems unconvinced there will be a resolution. we also hear from economists that the spanish bank bailout will add to spain's sovereign debt and raise this to a dangerous level. that's because the bond purchases now are being done at
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interest rates that are unsustainable. it does seem like there are serious economic positions that are being taken candia wretched that up and meet those or is there a point where the evidence comes down because the economic fundamentals are not there? you mentioned the ecb serving as the firewall but their lives -- there are limits. not only politically given the german view but there are limits. it is sometimes said that if the europeans had gotten out in front of the market, this would not have cost as much. it would have been over quickly. do you agree with that and are we coming to a point -- is their point beyond which they cannot
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recover? >> if you had done this as a cooperative game and got a head of the market, it would have been much cheaper. no doubt about it. as i said, the reality is is not possible for governments to handle for the kind of sovereignty that would entail. that is the problem. that is the process we're in. during believe -- in the case of spain, for instance. think about what is about to happen. first of all and this is an illustration of how the game works. spain for years denied that it had a serious banking problem because it had the sovereign ability to do so. as it became increasingly clear there were in a bind, a couple of months ago, they decided to begin digging the european central bank to buy his bonds so that he could finance the debt
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himself. the ecb said no. finally the spanish government were essentially forced to accept a bailout including conditionality. and so it is an iterative bargaining game. what just happened today which is more interesting is the fact that we're getting to the point where the spanish government rather than accept to pay the full bank bailout is thinking about imposing losses on bond holders. which is very painful because many of these bondholders are basically his supporters in spain. it is the choice between do you
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want to have more sovereign debt or impose losses on your political allies? this is a game that can go on. there are real at -- macro economic costs to this but i take the view that it is not yet at the point of no return. i believe basically in the mainstream forecast for economic growth in the year area which suggests a recession this year and a turnaround in the second half of 2012, 2013. this, given the longer-term handover of sovereignty that are involved is, for lack of a better word, collateral damage that i am willing to pay for this. i understand that -- an administration that has an election in november may feel
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differently. >> thank you. you have been a longtime observer of the french and german relationship and we have a new french government. they have had a couple of meetings with francois hollande and chancellor merkel. francois hollande came to office with a different approach to the eurozone crisis. the franc-german relationship in the past although difficult was nicolas sarkozy was key to what was happening in europe and the decisions the europeans made in this crisis. do you expect francois hollande and merkel to have the same relationship? will they work this out? what will this mean for the meetings will see today and next week? >> thank you. i happen to be pretty optimistic because my argument is that the
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franco-german engine works best for europe if it disputes. we have seen -- it was very bad for europe. it was bad not only because they took various wrong decisions which derailed the crisis but essentially when you have too big symbiosis, it did not give honor should to the smaller countries and the smaller countries need the struggle to fight and the deliberation process coming together to find the space and the place in the european compromise. this has been largely overlooked and -- what you would hear from the dutch to the austrians to forever, there would be fed up because the moment you have too
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great some biases, it is not good. webre that fight would be, there is a lot of struggle between banking union and political union between france and germany but the fact there is political struggle, i find this positive and i am confident there will be compromise and it is the best. be reminded by have these rosey ideas about franco-german engines. i was close to politics but it was just not fun. as i -- there was a book written in france, and the title was "the war of seven years, how
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france and germany made the deerow happen." the more they fight, the better of the compromises that you have a compromise that works for europe. i am confident that we would see a compromise along the lines of this. we see a pretty interesting -- between france and germany. germany replies we can do more moves on banking union, we can do that step but please bill where -- be aware this requires huge steps into political union, into legal things. it requires political integration. the french need to get it. i happen to have been in the office in 1992 and 1994. it was all there. the german argument about political union is a very old argument. if you want to read that, this
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document has it all. everything that is all -- is now out. have a different -- it was all said in the 1990's, the french did not accept. today i think there will lead to accept a little bit of this. >> what does this say, you're making the argument that there is a path to this relationship. >> yes. >> which clearly there is but what does it mean for the future? there have been a lot of predictions that the eu may bend failed. if it does survive, it will be smaller. it will be more of a core europe. do you believe that there is this the thing about -- among those who watch the eeo that out of crisis comes more europe, not less. is this the exception? >> i think it is pretty true. if uc -- if you see what they
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came up with which was a big study group proposal, a document that was an interim report because he consulted with 10 light-minded foreign ministers. i was there. ships in the way a new democratic european system at last. it is a powerful vision in the european system with a different set up. a very different type of, to chambers, more europe and more political union. this is important. if we come back to france and germany what france and germany need to succeed now to be brief on this, the need to achieve a new social contract for your. this is what the unrest is about. the social contract has two components. to refix the state relationship and to refix the capital
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relationship. if france and germany should succeed because they come from different socioeconomic traditions, it would empower the european union to have a pretty good consensus model where most of the countries can chime in. this is what they both knew. this is disputed. it is a chicken game but we see little progress on this. >> forgive me for challenging. we're in the midst of this economic crisis. a very uncooperative game was the term used -- you use. is this the moment to think about grant political the sign? one of the things i have been hearing as we will see a permanent division between north and south. france seems to be somewhere in the middle. there will be a very different
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europe going forward in terms of splits and divisions. perhaps even the threat of some domestic extremism in some countries given the economic crisis. what i was in europe earlier and talking to some of my north european colleagues, they did not see much of a future for the south of europe with them, at least in the eurozone. is this the moment to think about this? >> dawan discussion is basically everyone is sanguine need to distinguish on the architecture. >> they say we need a new architecture. it reshuffling of the architecture. this is hard to explain. for the germans, this means a fundamental reset of the institutional system including treaty change. this is a given. the other countries should come along excepting this. perhaps germany goes into the
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banking union. we may start with the redemption or whatever. i think this is the game. that means the erosion of national -- you need to rethink the democratic system of europe in a different way. that's a game changing moment. you go along with that thinking and you may think about that. this is one thing to understand. i think the other countries are coming there. for europe, i think there is no -- they have been talking about this union. this is -- this would not fly. it is nonsense. europe is part of germany.
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france needs to decide whether they will go north or south. that has held true for 50 years. you do not see the big currency union. it is completely absurd. this is why the arm wrestling between france and germany. i feel like the french need to come along. the germans came along first. the french did not give it to us. a further jump into the union. this is pretty much what is
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happening. i think the french are getting it. look at the system of the european union. the french work into government. tomorrow's discussion, executive is some verses parliamentarian some -- executivism. the need to come along and a different contract and under a political system that holds true for both. we will need to merger. the germans have -- she was nine times into parliament. nicolas sarkozy -- we need to revamp the component of the european system of the french -- and the french will need to
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understand this. >> thank you. ambassador gray. a lot of high stakes, high wire act bargaining. is this the eu that you saw? does this sound familiar to you in terms of your experience in brussels? why is is important to us? why are we here in washington talking about this? president obama thinks this is important. what is your argument? >> we have two economies that are highly integrated. 40% of the world trade, 60% of
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investment close, but 5% of the world gdp -- 35% of the world gdp. they are hugely integrated. up went to dinner and a walk in and it was some very nice. a belgian came up to me and said, i'm so glad to meet you. "where are you from?" said i'm from once did, d.c. -- washington, d.c. he said, "nobody is from washington, d.c." i corrupt and did not know that the belgians own where we bought our food. a lot of us do not know this. many of the bmw's that europeans drive are made in south carolina.
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there are too many regulatory disconnects. i think it should be one internal market. the european internal market is still not finished. we should not get very uppity about this. we have our problems, too. we should not be throwing rocks at europe's so much because there are things we need to do that they can help us with. the two economies are
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intertwined. it is not much that our banks would fail or that exports would drop, which they have. it is the overall picture of investment confidence. the year prince -- this is led by the germans. they want a more focused look on regulatory harmonization or mutual harmonization, cloaking it in the guise of a free trade agreements. this is not progressing very well. even run the administration is saying it is not a good idea in campaigning. why is it important? because if europe cannot find the key to the kind of
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innovation that we're used to -- facebook, google -- then we suffer. we're going to be at 2%, and nobody will be complaining if we were 3%. europe would not have a problem. you can trace almost the price of bonds in germany and italy depending on the progress of a free-market guy who was a competition in the commission. you can trace the progress in tandem with getting his reform program through the italian parliament. what is the key of this? sort of a trick question.
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who was the sick man of europe when i first got there? germany. what did they do? they did the reforms. schroeder never benefited from it. this is not the first time president bush 41 cleaned up the banking system. president clinton had a great run. that is life. part of the reform was not adopted until january of 2005. within 18 months -- what angela merkel wanted from the rest of europe -- we can do this deregulation. a little welfare reform.
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relaxing their rooms on hiring and firing. if we can do that, you can do that. the price of the bonds go up. interest goes up when it is up on the notion that he will eliminate the requirements without court approval. this is one of the more liberal judges. he said, you cannot do what in italy? you cannot fire anybody without court approval. "without my approval? that is insane." it is insane. if you get sick on vacation in europe, you get to take a
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vacation over again. it used to beat if you get sick before vacation, you could postpone in. you can read it in today's paper. gee-whiz. what a great racket that is. i hope to get sick in august. what we need, i think, is to take a look at these things that made it germany a success. there is an effort afoot to try to do that. then i think europe will be under less pressure if they had more growth. >> thank you very much. someone said we european politicians know exactly needs to do done. we just do not know how to get
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reelected after we do that. >> take care lumps. maybe in means you did not get reelected but you're treated well by history. >> we have furred a different view of the eurozone crisis, one that looks at this as a bargaining enterprise. one the requires crisis to work. we have a franco-german relationship that does better when they are having arguments. we have politicians who have commit political suicide in order to get these reforms through. no one in the current crop wants to do that. it is not a very cooperative environment . it is not an environment where everybody can make a rational
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decision and move forward. we do have a great impetus of the economy, pushing people fourth, debt levels, deficit levels pushing decisions to be made. we have the meeting next friday which we hope will have some decisions. i will open this to the audience. i think we have some microphones here. so, yes. back -- yes, that's right. please say who you are and your affiliation. >> i'm chris with manufacturers' alliance for productivity and innovation. >> stand, please. >> i hold them in high regard. i read their stuff and i value their writing. i will be challenging their views today.
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we have a game of chicken which is trying to subtract sovereignty, which is given to any group of countries. we have a conflicts that is almost needed to advance integration. we have a conflict that is needed in order to deepen integration that is supposed to avoid a conflict. i think the search for first best solutions that we have an inability to concentrate on plan b and have the second-best as an option is causing this crisis. second-best is not being attempted or spelled out. the in-between area is causing
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the crisis. why do we have to have a crisis in order to solve the crisis? b, don't we except plan spell out to the voters, and regain the credibility down the line? i cannot put it any other way. >> is there a plan date that would work -- is there a plan b that would work? europeans are accused of not finding the big solution. rather of muddling through. money into that for you -- let me answer that for you, jacob. there is a timing issue. what would be better off having less of that time to distance to get to the goal and be able
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to have something, a win of some kind? there was a speech a month ago where europe was given three months. >> he also said last year about three months. >> two weeks last year. >> there are others as well who have said this. is there a second best? >> this is second-best in many ways. that is not possible because of the sovereignty issues involved. we are now in a second-best solution here. with respect to the timing
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issue, the way i view it is perhaps slightly broader. remember the euro area is trying to get. a new center that has been created. that is harder to do than the white continent are normals it unified which is through a military conquest historically. we have states versus the federal discussions about who does what, who pays for what, these types of issues. it goes on all the time. the same discussion about -- hear we caught states' rights issues -- here we cal it state's right issues. there is not a center that everybody believes will hold.
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i believe it will and that we have crossed the point of no return. it will be much more expensive for everybody involved to dissolve the european union that goes to this process. will we need to do is to get -- what we need to do is to get to the point where the center will hold. to have these state right debates internally in europe. when will that happen? that is a very good question. we need a banking union.
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we clearly also need a partial debt neutralization of sovereign debt. i don't think that can be achieved maybe in a five- to eight-year time frane. that does not mean that in the meantime we cannot have a quieting down of the sovereign debt market, of the sovereign bond market instability. the way it works, the political function of the ecb, it lends its balance sheet. i would expect that to happen after next week's summit. >> second-best plans? what does this look like between france and germany? to the other countries not part
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of the decision making process -- is it second best for them? the incentives for germany to compromise and particularly chancellor merkel. she has eight favorability rating of summer between 55% and 60%. >> i would agree. how long do we go with the half pregnant situation? angela merkel has issued a couple of speeches will take five years to go to the institutional set up. there is work to do.
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trees will be conveyed into the treaty work -- treaties will be conveyed into the treaty work. something of a refundable work in the institutional set up. also with respect to how the european parliament functions and whether we can work on more transnational parties. we're at 15 years of -- 50 years of franco-german treaties. the symbolics of that. what is it for the smaller countries -- what is in for the smaller countries? i do not want to say they did not have other charges. the smaller countries of the largest benefits of a strong european group. the benefit from the energy policy and from a strong set of support. the smaller countries, as long as they have ownership in the system, and that will be
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important. i do not like the discussions about federations' any longer. it is too much in comparing to the united states. we will need to have a moment. plenty of art values -- plenty of our values. there must be like something like creative thinking. there is more for the smaller countries. >> do you want to comment on that? >> this sounds vaguely familiar.
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i used to say, taken from us -- take it from us. belgium, germany -- we are the old countries. this is not an unfamiliar think we're going through. many europeans are saying why germany should not pick up the debt. it happened when it was formed. there was a huge debt crisis. the states bet on canals and more overtaken by the railroads. "will you bail us out?" washington said no. we have seen this movie before. we used to say brussels needs to get stronger before it can be weaker.
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it needs more of a democratic element. the president has to be publicly elected. there has to be this element of it. the french are going to resist this. i have to be careful how say this. my experience was that the french really knew how to run the european union. i used to say to buy british friends who dominated the staff, and the brits being so good at this. "you really do dominate, don't you?"
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"no, no, no. it's the french. the french dominate everything." this is the problem. the french do not want their power diluted by eastern europe, let alone the united states, if we were to be more integrated in terms of our relationship. i think the french do have to come along on this. >> very quickly on this issue of the pulling of the sovereignty.
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it is important to distinguish between the timetable for the fiscal union and for the banking union. you can pull solvency like the european central bank. you cannot do that with a fiscal policy. the need to create a new political institution, which will take the time frame that we talked about. i don't believe the banking union is that far away. >> next week? >> i think we'll have an announcement next week. the pulling of not debt but contingent liability. >> a question here. can i get a microphone here? >> i'm with the atlantic council. i want to congratulate the panel. i wanted to enlarge the discussion about a headline i remember reading in london the read channel fogged in, continent cutoff.
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what is happening in syria and iran? you can imagine will happen to the stock market when the supreme court rules on the health care bill. i wondered if the panel might address some of those and how they might be dealt with if that all. >> at first i thought you're going to ask ask-- something much broader than that. we've had eight bad with issue -- we have had a bandwidth issue. it has been phenomenal. why don't you start?
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>> there is an easy answer. we're trying to shift the system away if and we're doing this for all the reasons that jacob mentioned. if you shift the system without gaining ground, the risk is always there that you can lose it. i am convinced that markets already have the story that will succeed a go forward. your point is a valid point. the unknown risk. we do not know about the unknown risk. the law of unintended
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consequences. we have been seeing this in these movements and it led to other consequences which were unintended but progress other difficulties. i think we need to have that in buying. -- i think we need to have that in mind. there is a problem. if all this goes right, we'll be keeping a whole political system under strain for the next five years to come. the strain on political elections and the narrative right and the press but overshooting and whenever, what is poisoning the atmosphere and the poison the electoral things and this is a risk. i agree. >> i'm not sure if you meant to
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include this, but as we look from here in washington and the discussion about the pivot to asia in u.s. policy, is the euro zone crisis making europe less of a partner for the u.s. in addressing global issues and in the way that europe is seen in international institutions such as the imf, the world bank, etc.? is this something america has to think about it in terms of european capability to act elsewhere. even in diplomatic standards. >> all this talk about the u.s. and 20 years i'm listening to this. i never saw the u.s. so actively commentating and looking on in europe like now.
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i am at a fellowship in new york and it's all about europe and germany, trying to get the political economy of europe. there is realizing we of the utmost partner for the united states on earth. this is one of the best unintended consequences of the euro zone crisis. >> you want to comment? >> i am a broken record on this. joseph had a great piece yesterday on this. we will get copies. if we don't -- and it starts with economics -- my old man used to say money is not everything, it is just about everything. it starts with the internal markets.
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internal market has to be a transatlantic. if you don't have the economic growth, you cannot pay for anything else and you cannot do the things that we are talking about. you need economic growth. that is where real liberty comes from and real opportunity. we can do that, but it has to be part of the debate. if we don't -- this was from a leading german business and science figure, if europeans don't get their act together with common values, different as they maybe in some respects, asia will drive through and the whole game will be lost. what happens between us and europe is critical to the future of the world economic order.
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if we don't get our act together and, we don't hang together, we will hang separately. >> thank you. we would like to bring in another voice. i'm with the transatlantic business dialogue. my name is catherine hauser. i think what americans think of your rope, they think of the u.k. -- think of europe.
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most of our exports go there and we have a close relationship with them. i'm interested in the panel's thoughts about the troubled u.k. may cause in all of this. >> jacob, do you want to start on economics? >> yes, i think this is first and foremost a problem for the u.k., quite frankly, because i think that what you will see is increasingly -- i know there is talk of [unintelligible] , but in the long run, because of the benefits for the smaller countries that are part of the european integration, i think in the long run it will end up being 26. i feel very confident about that. if you think about why that is, poland is a member of the group that she mentioned in the beginning. this is not and eu 15. it is a group with everybody in.
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who knows what the czech republic will do. then we are into a situation of 26. in the long run, unfortunately, the politics of the u.k. is no more certain to keep it out of these deep sovereignty issues. the role of the city of london in this is a good question. i guess at the end of the day, as came out a couple weeks ago in open europe they had a report on what the u.k. should do in this and these are people who are skeptics and they said at the end of the day the u.k. has more to gain from being inside and outside.
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i think they will remain a member of the european union. whether or not it will be a special relationship than a full member, that is up to debate. but they will not be part of the core of it in the long run. >> the camera on government has been quite concerned about their ability to have influence over regulations on financial services. -- the cameron government. it is a single market, the u.k. do you think they will be able to protect their interests in financial regulation? >> if they do, it is for the narrow party political reasons that david cameron chose to stay outside. i think it was a very stupid thing that he did, because he basically chose to have a couple good headlines in the daily mail and the other tabloids
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rather than think about the decisions about financial services in the internal market already taken by qualified majority. it means the actual needs allies in the european union already. by staying out of it is not a way to get a lot of friends. so in a huge mistake for short- term gains. will they ultimately succeed? i think they will. i think there will be allies for the traditional open market model that the u.k. is associated with, free trade, etc. also because the u.k. is not associated with a light touch financial regulation.
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so i think there's room. >> go ahead. then we will go back to the audience after your comments. >> what is the principal dispute between london and brussels over financial regulation? anybody? >> financial transaction taxes? >> no. >> they don't like that. that's true. i don't think we should like that either. i think i know what it is. we had joseph ackerman to address this. he is the expert. we probably all think the issue is the british want to have less regulation than brussels.
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that would be wrong. what they want is high capital standards for british banks, which the europeans do not want. they want those banks to do more lending in europe, which the british taxpayers will pick up the tab if something went wrong. so there's a tug of war. . it is counterintuitive. nobody in america knows this because the press does not report it. england wants tighter regulations. high capital standards mean that you don't have to do any other regulation. like we have over here, the continent does not want to do that. i'm going into this because the regulatory details really matter
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and they are really boring. >> thank you for that. >> i want to drop a little vinegar into the wind. -- wine. if we need a moment of an institutional game change in which we changed the institutional nature of the system in a way that we probably cannot go with unanimity -- somebody told me rhode island did not do that and dropped out. we have learned not to do the
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institutional game change as we're waiting for a danish yes or no or an irish yes or no. a game change cannot come with british conditions. we gave them a first chance in december when we said we would not always wait for you guys. that's not to say we don't want the uk on board. it's very important country and the city of london. my argument would rather be the german government should be more decided to go eu 17 at the detriment of 27 with the hopes that others would come along. the u.k. can do it if it wants to. >> i saw a question over here. let's get a microphone. >> thank you. scott harris, atlantic council. recently i was running the european office of lockheed martin the last 10 years. we had several interesting adventures together, with ambassador gregg. i want to thank the panel for an interesting discussion. -- ambassador gray. i have a concern. always when we have these institutional discussions about mutualization and building deeper and treated changes, we
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assume that the governments of europe can do what they say they will do. i am concerned that especially 3 southern european governments will be forced to and will sign up to things they actually cannot implement. ken the brakes really reform the state sector and collect taxes? can italians reform the labor market and deal with corruption? can the spanish get the regional governments not to run deficits? there are political problems that are very deep and cannot be solved by dictation. do you share that concern? >> i think in many european discussions this has come down to are the germans pushing everyone to become germany? and whether some of the long- term institutional factors in many of these other countries can change. what do you think? how much room for diversity will there be in this post-physical contact?
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>> i am with you that the inertia on the ground is enormous. if you look closely at germany, we also are now having people waking up. berlin is as indebted as the greeks. there's a huge inertia at work. the same in spain and italy but. i give you something else, which is my biggest problem, how do we make all this work, and transnational democracy? if you want to take crucial decisions on how do you send your money, it's not so easy. this is why we are filling up the press instead of who should pay for the crisis. [unintelligible]
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you see french camp socialists coming together with greek workers -- french socialists. if you look at elections and populism in europe, we have a 77% -- 30-70 divide. you have an average populism, leighton populism of 30% in the netherlands or france like left and right pulled together. that is most often a regional pressure and goes against the more europe argument in the constraint. for the rest, there's more of an economic argument, which is how much diversity we can allow in the economy. i hope we can have this discussion. if we win this discussion, we have won the future. it's not about whether germany is rich. germany is very poor. 50% unemployed regions. there is a solidarity concept. we don't compared trade to export figures. if we could mentally and
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intellectually shift to the european system as an aggregate economy and then do fiscal transfer from wealthier regions to less wealthy regions rather than doing german money to fiscal transfers, then we would have done the intellectual and mental game change. i think we are preparing the ground that much more about wealthy regions to poorer regions. we will need to accept poorer and richer regions in the european union. everybody can be different while we are still denied said. that's the work we will need to achieve and its big work. >> did you want to -- >> yes, my daughter said that if you did not catch a greek citizen before noon, you could not read to them in the afternoon, the bureaucrats.
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she never had any trouble reaching anyone in germany. let me read a couple figures from the article.
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>> germany's unit labor cost taking into it -- not taking into account east germany was 7%. it'll it was 30% and in spanish with 35%. 42% increase, the unit labor cost -- 42% in greece. that is almost with the problem begins and ends. cosumnes diversity can we get under the compact? >> eventually you will get there, but i think there's a very important distinction i would make. whatever the unions look like will be very different from that of the united states. the euro zone in almost any conceivable shape or form that i can conceive of will not have a sizeable federal budget like in the united states. the reason is simple. it has to do with people's self identity.
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because europeans continuously self-identified as french, german, belgian -- or maybe not belgians, actually. [laughter] but the point is you will only accept being taxed at a level in which yourselfidentif -- you self identify. the willingness of americans to pay federal income tax is much higher than the willingness of europeans to pay taxes. the public sectors in europe are larger than in the u.s. the overwhelming amount of
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public spending will remain at the state level, much more so than in the united states where the predominant taxing power is the federal government and then spending directly in the benefits system or giving in grants to the states. that system in europe will be different. the money will be raised and spent at the member state level. you will have some sort of -- that's why there's a focus on fiscal rules, how you spend the money that you raised at the member state level. there's quite a lot of room for diversity within this system, because it is necessary, because there's no possibility of a large 10% or 20% of gdp federal budget. >> i will ask for a brief
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questions because we're coming to the end and we have several questions still out there. this gentleman in the front. and the next is in the back. >> . ben from the economic strategy institute. thanks very much for an interesting discussion. i think there's a very compelling description of this being sort of a high-stakes game of chicken over and over again in the european union. given the stakes of the sovereign issues involved with the banking units and fiscal
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units, it's not hard to understand. given the time frame people are talking about in terms of setting up a banking union and a fiscal union, how credible is it that the ec began keep the pressure on? -- the ecb. it's trying not to be the lender of last resort. imagine a scenario where french sovereign bond yields start to rise because some market gets a little worried, it's hard to conceive the french would accept that and they would not say, listen, you've got to do something at the ecb? can the board members maintain the pressure? >> and how much longer can analysts like ourselves continually wonder if this is the week that the crisis will be?
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>> i believe the actual firepower of the european central bank is a lot higher than is generally perceived by the market's. with respect to what they would do in the case of a spike in french bond yields, i think it would -- then we would go back to the issue of conditionality. you would have a situation -- recall what happened in august last year when the issue was whether or not john club treats shade and dragi would purchase -- -- whether trichet and dragi would buy italian debt? the same thing happened in france. they would be met with some degree of implicit conditionality in terms of whether it's labor markets o
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whatever in terms f -- in return for those purchases. more importantly, and this also goes to the market psychology, what you need to have is the market circumstances in which a convergence trade is once again feasible. what that entails is -- because when you have that, markets all of a sudden will buy because they think they will converge. there's a need to convince the markets that the center will fall. because once that happens the markets will actually help you in the way that they helped the european integration much too much in the early years of the economic and monetary union where there was excessive convergence, because it basically led to complacency of the policy level.
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the point is you have to read this sort of threshold and then the divergence will become convergence. ecb is perfectly capable of that. >> let me go to the back of the room and then we will get another question here. the last question. >> i am randy at american university and the peterson institute. i want to thank the four of you for an interesting session this morning. and follow up on ulrike guerot's point about the transformation of european politics as we move forward from here, which i thought it was intriguing.
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in particular, i want to ask you a little about transeuropean political movements. these will be an important complement to the kind of institutional transformation that you discussed. i would like to ask you, because i think that you could look more closely at this than most of us have, i would like to ask you
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about the cooperation between the french socialist party and the german s3d. i had thought the challenge for them has been to come to agreement on what to ask as the quid pro quo for moving forward with the fiscal, and the stability treating? it does not seem to me they have come to much of an agreement on this. i have been disappointed it has gravitated to the financial transaction tax, which does not help moves fiscal union and banking union's ford. i will ask about the basic -- fundamentals, the corporation between these two parties and some of the negotiation between them over the last week's. >> ok. let me get a microphone over here, quickly. >> peter, u.s. chamber. i want to ask whether the panelists believe the market's should inflict their concern about the distance that these countries can go on with reform. even some of the core countries like germany and austria, the service sector is very sticky. maybe there's a limit. if that's the case and markets are asking themselves the same question, does that not argue for something very big pretty quickly along the lines of our redemption fund, which did work very well to get from the articles of confederation to the constitution? >> final question in the front. >> the european union delegation to the u.s.. [unintelligible]
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the main variable is the transfer of sovereignty. i wonder whether this should be a positive sum game. we have also received as a non [unintelligible] more countries benefit is a misperception. the idea that germany pays and the others don't, germany does pay its fair share, but the others do as well. unit labor costs have been diverging and cannot converge
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again. the last three years have shown that they have converged again. clearly, the perception is related to the democratic process. would you not agree that leaders realize the nature of the cooperative gain and in the end can find a solution? >> do you want to finish? >> i would like to share that. i don't think there's any doubt that unit to gain is a plus sum game. when i talk about an uncooperative game, that is a theoretical idea that you basically have to have a game of chicken for it to unfold. that is more a process element. i certainly agree.
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i agree with what you said that these diverging labor costs and unit labor costs that we referred to earlier, there are rapidly converging. we should also be careful not to have much of a unit labor cost, because they don't represent actual export performance in many of these countries, so they're not the ". -- not equal. i will stop there. qwikster you want to comment than-european? political european >> i'm from the area of cologne, germany, which has a beautiful cathedral and i think the european union is threatened by it. when it is finished, they will start at another angle to do construction. this is to be understood. the crisis is over, in a way.
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they are buried in each step of the crisis to prevent it. i think they understood it. what that is evil see. we do what that is, we will see.
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i called this the long shadows. i try to match economic thinking of german parties with respect to mainstream international banking. what you it would still be for ecb. it cannot be the growth argument. they would see that you do not do this final growth.
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of course, it was in recent weeks. they wanted to show solidarity. it did not want to just with the fiscal compact. she needed the boat. they wanted to do a favor. it did not happen. it makes you understand that -- that is what i want to give you. we have elections next year. what could change the there? it will not change much. even with the coalition, and you will not see game changer is and how this crisis is to be solved.
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you will hear the messages of stability in chartreuse reform. here is the thing. they have been talking very closely. the discussion started against this for years. they also did this on foreign policy. this is what europe is about tomorrow. more cooperation. this is the good side. >> a one quick word. the europeans should not invoke redemption of the retentio without understanding the quid pro quo was the market.
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it 0.2 and both of that model. they should also it said the internal market deal. >> i want to thank the panel. i think they pointed out that the eurozone crisis is a political animal and disagreement. the range of topics to the political building of the united states just demonstrates how accurate that was. i hope that you all have found the view of this as a bargaining enterprise. it is to be helpful and understanding what is happening in europe. this evening we will have the uncooperative gain.
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we will all be watching and seeing how this comes out as a metaphor for the future of the eurozone. thank you. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012]
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>> he will speak at the brookings institute. they will speak about the emergency plan for aid relief. it was started under president george of the bush. joining us live for his remarks at 10:00 a.m. eastern. >> the house represent is is is an on tuesday. on their schedule, 2013 spending bills for the transportation and housing department and a vote on the content of congress resolution. meanwhile, lawmakers will take up a flood insurance measure from drug makers and manufacturers of medical devices. both chambers face a july 1
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deadline to prevent student loan interest rates from doubling in to reauthorize the surface transportation bill. what live coverage on c-span. >> the veteran affairs carbon estimate that 18 veterans and their own lives every day. military leaders discuss the rising suicide rate of veterans at an event of hosted by the veterans apartment. big talk about the treatment of veterans. this is a little more than an hour. >> please welcome. >> i figured unami by now.
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this is my time this morning to give you a few minutes on an update. i thought about everything that i had heard in seen. i decided that you probably know all the great and wonderful is doing. be va it seems silly to stand up here and talk about them yet again.
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what struck me is as great and wonderful as all of the service branches are and how strong their programs are we have a of a long way to go. i think that this is the time to take on that challenge. i made some quick phone calls this morning. yesterday during that hour when those powerful speakers or telling us their story, 42 people called the veteran and military crisis son. fowindows 28 of those eyes is a fight themselves as veterans.
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the chaplain some bases during that timeframe. we may two rescues. one of the people who called artie started taking pills. they got there in time. a significant number of people who called the crisis, he did not get a referral, he often not to do that, who did not get a rescue because they were not in an immediate crisis are we did not know who they were. there are several of those out in our communities and on our military bases every moment of
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every day that we do not know who they are aware not reaching and touching their lives. i suspect that there are several him maybe diday' tell someone they were in trouble. you did try to get some sort of help. maybe in a halfhearted sort of way. there is the level of ambiguity that was their fair i think the hard part of our jobs is yet to come. i think we have hit the low hanging fruit. we have done the easy things. we need to continue to do those. do not get me wrong. we are making an incredible difference. i want to challenge us to take
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that step and reach into the corners where we do not know what is in them. it is all about being there and being visible and contacting people and touching people's lives. not being afraid to say to people "are you ok?" maybe it is scary to talk to help professional. maybe people will not do that because of the stigma. it ought to be able to talk to us and talk to their friends and neighbors and the people they work with every day. without any fear of reprisal. they're challenging us to be those people. this week for suicide prevention awareness month, which is coming up in september, we have chosen the theme "stand by them." it is a call to action for
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friends and family and co- workers and all of us to be there for each other and be there for our service members and veterans, to help them get out. more importantly to stand with them and there's struggles and triumphs. i am putting out a call to all of you to take that on as a personal challenge. not something someone else has to do this and i have to do in you have to do. let's stand up now if you are willing to take the challenge in stand by them for military service members.
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i do suspect that we're going to hear more challenges staring the rest of the morning. i am excited about the tv as secretaries coming to talk with us. it lends another level of importance for what we do. we are in for an exciting morning. we also had a great evening last night. i think this was ok one of all experiencing a everyone is doing. we had 250 participants. it total of 150 of you both did. this was exciting. the winners are going to recedre
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a package of fun stuff as well as the supplement to the journal of public health focus on suicide prevention. they also received a certificate which i'm sure they will be happy to put on their wall. the first place winner in the practical application track, and it there in the room, please and. up [applause] there she is over there. the second place winner is from the clinical track.
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then they thought versus action between suicide thinkers and and and the temperatures in the veterans' population. there's stephanie. thank you. it was great. on that note, i think we'll move right along to our first panel this morning. and to introduce that panel alibi to introduce to you retired sergeant major what termer alice. is the chief of the suicide prevention program. he is also a good friend. >> the morning. you are in for a big tree.
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you have the best advisers we have to offer. please pay edited. -- pay attention. they will share with you their views that they have helped. for the particular services. i will call each one of them to the stage. i would like to introduce the chief sgt.
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